ECONOMICS OF CORRUPTION2
a destructive enemy for enemies, but a greater friend for friends. This implied that accepting
a bribe from Schreiber rendered Pfahls responsible enough to reciprocate and carry out the
illegal deal.
While dealing with corrupt individuals, the most unlikely thing that is expected of
them is trustworthiness (Lambsdorff 2015). However, the conflicting shades of trust and
distrust seen from various perspectives is what forms a crucial element determining the
economics of corruption. Criminals are known to distort information, cheat and deceive
investigators. However, trust, in general, is a foundation necessary for economic exchange,
be it for a legal or illegal cause. A trust-game conducted for two anonymous participants
provide a practical example of how a trustful co-operation can lead to beneficial results.
While misleading the authorities is seen as the mandatory first step towards conducting an
unlawful task, co-operation among members of the plan is likely to bring about the most
efficient results.
The concept of intrinsic behavior probes into the issue of compliance and the potential
impact of disciplinary practices to curb corrupt behavior (Lambsdorff 2015). Corruption
prevention systems like ethics training, external and internal audits, or regular reporting are
costly to implement. The benefits of enhanced reputation or avoidance of fines might be
outdone by higher compliance costs in the long-run. There are costs greater than such
measurable compliance costs. Stringent rules and regulations may adversely impact officials’
intrinsic motivation. This is because an extrinsic substitute crowds out this intrinsic
motivation. If employees are forced to conform to regulatory norms, their self-esteem and
their intrinsic urge to perform diligently is hampered. Then, the quality of their work comes
to be guided by external incentives like bonuses or risk of being dismissed.
The Four-Eyes Principle

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